Lessons for Café Tenants

Running a café in a small town can be as much about the relationship with your landlord as it is about your menu. A recent case before the NSW Civil and Administrative Tribunal—Gardener v Bright; Bright v Gardener [2025] NSWCATCD 23—serves as a stark reminder of the importance of clear agreements, written leases, and compliance with rental obligations.

For café tenants in particular, this case offers important legal and practical lessons. It underscores how informal arrangements can quickly unravel and how critical it is to understand the framework of the Retail Leases Act 1994 (NSW) and your obligations under a retail lease.

Background: Café Operations and a Disputed Lease

The case involved a dispute between Rachel Gardener (the landlord) and Rose Bright (the tenant), who operated a café in Baradine, a rural town in New South Wales. The premises in question had formerly been used for a café called Casey’s Corner Café, later rebranded as Twisted Rose Café Baradine.

Bright began occupying the premises in late 2022, following a short-lived partnership between her daughter and the landlord’s granddaughter. Over time, Bright became the sole operator of the café. However, disputes arose over unpaid rent, tenancy terms, and claims of verbal agreements or employment relationships.

Importantly, the parties disagreed on whether a valid lease existed at all. The landlord claimed there was a retail lease in effect and sought a writ of possession for non-payment of rent. The tenant, on the other hand, denied the existence of a valid lease and contended that she should be protected either under the Residential Tenancies Act 2010 (NSW) or on the basis that she was managing the café on the landlord’s behalf.

Key Legal Issues Considered by the Tribunal

The Tribunal, presided over by Senior Member Graham Ellis SC, had to determine the following:

1. Was there a valid retail lease between the parties?

2. Was the tenant liable for unpaid rent and other costs?

3. Did the Tribunal have jurisdiction under the Retail Leases Act or the Residential Tenancies Act?

4. Was the tenant entitled to remain in the premises?

The Tribunal’s Findings

1. There Was a Valid Retail Lease

The Tribunal found that a retail lease existed despite the absence of a signed document. This was primarily because:

• Bright had taken possession of the premises, operated a café business, and made rent payments;

• She had received and acknowledged a lease document sent by email on 23 December 2023 and replied, “Received and understood”;

• She later acknowledged in writing that rent was owed, stating, “I’m aware that rent is owing, and I will catch up and backdate as much as I can.”

These actions met the criteria for a lease under s 8(1) of the Retail Leases Act 1994, which provides that a retail lease is considered to have been entered into when a person either takes possession of the premises as lessee or begins to pay rent.

The Tribunal also applied the doctrine of estoppel by conduct, preventing the tenant from later denying the existence of a lease after acting as though one existed.

2. The Residential Tenancies Act Did Not Apply

The tenant argued that the Residential Tenancies Act 2010 (NSW) applied because she also lived on the premises. However, s 7(h) of that Act excludes residential coverage when the primary use of the premises is for business purposes.

Given the café operations were the predominant use, the Tribunal found the Retail Leases Act applied, not the Residential Tenancies Act.

3. The Landlord Was Entitled to Possession and Limited Rent Arrears

While the landlord initially claimed over $16,000 in rent arrears, she struggled to provide clear evidence of payments received versus rent owed. Ultimately, the Tribunal:

• Awarded $1,400 in arrears, reflecting amounts due under a prior Tribunal order from February 2025;

• Ordered the tenant to vacate the premises by 23 April 2025;

• Confirmed the landlord’s right to re-enter the premises and to apply for a writ of possession if the tenant failed to vacate;

• Rejected other claims by the landlord for a $50,000 business loan repayment, $5,000 in water and land rates, and $20,000 in “make good” costs for repairs, due to insufficient evidence.

The Tribunal noted that “justice does not dictate that... a figure should be plucked out of the air” when a party fails to provide adequate evidence (citing Troulis v Vanvoukakis [1998] NSWCA 237).

4. The Tenant’s Cross-Applications Were Dismissed

The tenant lodged two cross-applications, one alleging breaches under the Retail Leases Act and another based on the Residential Tenancies Act. Both were dismissed. The Tribunal:

• Declined jurisdiction over employment-related claims, stating that the proper forum for such matters was elsewhere;

• Found no evidence to support compensation claims for emotional distress or reputational damage;

• Determined the tenant’s occupation was clearly under a retail lease, not a residential tenancy or employment arrangement.

Lessons for Café and Retail Tenants in NSW

1. Never Rely on Verbal Agreements Alone

In this case, the tenant claimed there was only a verbal agreement allowing her to live and run a café on the premises. However, the Tribunal relied on documented actions, such as written acknowledgements, payment history, and the use of the premises, to find that a binding retail lease existed.

🔑 Takeaway: Always insist on a written and signed lease agreement, and avoid informal or ambiguous arrangements.

2. Acknowledging Rent Obligations Can Be Legally Significant

The tenant’s message acknowledging that rent was owing played a critical role in establishing the lease’s validity. Even without signing the lease, her conduct created binding obligations.

🔑 Takeaway: Be cautious when communicating with your landlord. Written acknowledgements or promises to pay rent can be used as evidence of consent to lease terms.

3. Keep Proper Records of All Payments

The landlord was unable to substantiate many of her financial claims due to missing or incomplete records. The Tribunal awarded only $1,400, much less than what was claimed, because there was no clear evidence of rent owed after accounting for partial payments.

🔑 Takeaway: Whether you’re a landlord or tenant, always maintain accurate payment records, including bank statements that clearly show amounts paid and the purpose of each payment.

4. Understand the Legal Framework for Your Business Premises

Running a business from leased premises requires awareness of the applicable laws. In this case, the Tribunal emphasised the importance of identifying whether the Retail Leases Act or Residential Tenancies Act applies and the implications that flow from that.

🔑 Takeaway: Café tenants in NSW are almost always governed by the Retail Leases Act, even if they live on-site.

5. Avoid Subletting Without Landlord Consent

The tenant had allowed a third party to run a small retail business from the café space, without the landlord’s consent. This was treated as a sub-lease, strengthening the landlord’s case for re-entry.

🔑 Takeaway: Always seek written approval before subleasing or sharing space. Doing so without consent may breach your lease and result in eviction.

6. Claims for Compensation Must Be Well-Founded and Evidence-Based

The tenant’s claim for emotional distress and reputational damage, and the landlord’s claim for renovation costs and unpaid loans, were all dismissed due to lack of evidence.

🔑 Takeaway: Claims must be specific, documented, and within jurisdiction. Tribunals and courts will not make findings based on emotion, speculation, or anecdote.

Final Thoughts: A Wake-Up Call for Café Tenants

The Gardener v Bright case is a timely reminder of how legal disputes over retail premises can escalate and how crucial it is for café tenants to protect themselves with proper documentation and understanding of their legal obligations.

While community-based and small-town business relationships often start informally, relying on good faith alone is risky. The Tribunal’s decision makes it clear: courts and tribunals decide matters based on evidence, documents, and objective conduct, not personal impressions or informal promises.